IDB launches seminal report on climate risk and stranded assets

Study aims to provide a deeper understanding of potential costs and to highlight opportunities for future work, in Latin America and the Caribbean and globally

The Inter-American Development Bank (IDB) has launched the report “Stranded Assets: a Climate Risk Challenge,” authored by a team from the University of Oxford led by Ben Caldecott, and edited by the IDB’s Ana Rios. Stranded assets are defined as assets that have suffered from unanticipated or premature write-downs, devaluations, or conversion to liabilities. Stranded assets can also include environment-related risks such us changing resource landscapes, new government regulations, evolving social norms and consumer behavior, and litigation.

The topic of stranded assets has taken on increasing importance in large part due to changes in the real economy in many countries—e.g. the declining cost of energy from renewable sources— as well as from attention generated by the UN Paris Agreement on Climate Change that is currently being ratified by signatory countries.

Despite the importance of stranded assets, there is little analytical work available on the subject, particularly regarding Latin America and the Caribbean, a region that is vulnerable to the physical effects of climate change and to regulatory responses to the phenomenon. A better understanding of the topic could lead to the design and implementation of management strategies that might contribute to diffusing some of the associated risks.